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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Total Product of Labor (TPL)
Opportunity Cost
Average Fixed Cost (AFC)
Constrained Utility Maximization
2. When firms focus their resources on production of goods for which they have comparative advantage
Constant Returns to Scale
Marginal Productivity Theory
Specialization
Total Revenue Test
3. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Accounting Profit
Luxury
Marginal Productivity Theory
Productive Efficiency
4. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Spillover benefits
Non-collusive oligopoly
Average Variable Cost (AVC)
Break-even Point
5. The difference between total revenue and total explicit and implicit costs
Price Elasticity of Supply
Perfectly inelastic
Economic Profit
Price elasticity
6. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Monopoly long-run equilibrium
Average Product of Labor (APL)
Marginal Revenue Product (MRP)
Allocative Efficiency
7. A good for which higher income decreases demand
Price discrimination
Inferior Goods
Productive Efficiency
Constrained Utility Maximization
8. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Fixed Costs (TFC)
Economies of Scale
Price Elasticity of Supply
Cartel
9. AVC = TVC/Q
Average Variable Cost (AVC)
Free-Rider Problem
Price inelastic demand
Average Total Cost (ATC)
10. The output where ATC is minimized and economic profit is zero
Subsidy
Break-even Point
Complementary Goods
Law of Supply
11. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Price discrimination
Cartel
Monopolistic competition
Complementary Goods
12. Ed = 1
Unit elastic demand
Incidence of Tax
Average Fixed Cost (AFC)
Opportunity Cost
13. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Perfectly elastic
Determinants of Demand
Price elastic demand
Monopolistic competition long-run equilibrium
14. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Law of Diminishing Marginal Utility
Unit elastic demand
Productive Efficiency
Constrained Utility Maximization
15. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Total Fixed Costs (TFC)
Total Revenue
Determinants of Demand
Natural Monopoly
16. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopoly long-run equilibrium
Scarcity
Determinants of elasticity
Negative externality
17. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Price floor
Allocative Efficiency
Determinants of Demand
Spillover costs
18. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Marginal Cost (MC)
Relative Prices
Excise Tax
19. Entry of new firms shifts the cost curves for all firms downward
Normal Profit
Derived Demand
Decreasing Cost industry
Production function
20. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage
Marginal Resource Cost (MRC)
Short run
Collusive oligopoly
Constrained Utility Maximization
21. Models where firms agree to mutually improve their situation
Positive externality
Price Elasticity of Supply
Economics
Collusive oligopoly
22. A firm that has market power in the factor market (a wage-setter)
Price Elasticity of Supply
Monopsonist
Price elastic demand
Normal Profit
23. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Complementary Goods
Scarcity
Accounting Profit
Dead Weight Loss
24. Ei > 1
Complementary Goods
Market Equilibrium
Luxury
Average Variable Cost (AVC)
25. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Marginal Revenue Product (MRP)
Producer surplus
Price Ceiling
Private goods
26. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Income Effect
Total variable costs (TVC)
Perfectly competitive long-run equilibrium
Derived Demand
27. The additional cost incurred from the consumption of the next unit of a good or a service
Monopoly long-run equilibrium
Marginal Cost (MC)
Law of Increasing Costs
Law of Demand
28. Ed = 0 - no response to price change
Opportunity Cost
Marginal Cost (MC)
Perfectly inelastic
Fixed inputs
29. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Relative Prices
Oligopoly
Price discrimination
Monopsonist
30. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Negative externality
Relative Prices
Spillover costs
Law of Diminishing Marginal Utility
31. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Collusive oligopoly
Free-Rider Problem
Income Elasticity
Absolute Advantage
32. The imbalance between limited productive resources and unlimited human wants
Scarcity
Cartel
Necessity
Decreasing Cost industry
33. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Law of Increasing Costs
Total Fixed Costs (TFC)
Specialization
Short run
34. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Price floor
Perfectly elastic
Income Effect
Determinants of elasticity
35. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Long Run
Marginal Productivity Theory
Private goods
Economies of Scale
36. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Accounting Profit
Monopoly long-run equilibrium
Marginal tax rate
Cross-Price Elasticity of Demand
37. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Free-Rider Problem
Utility Maximizing Rule
Monopolistic competition long-run equilibrium
Surplus
38. The difference between total revenue and total explicit costs
Total Revenue
Accounting Profit
Excess Capacity
Decreasing Cost industry
39. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Substitute Goods
Cross-Price Elasticity of Demand
Economics
Opportunity Cost
40. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Incidence of Tax
Normal Profit
Marginal Analysis
Cartel
41. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Total Revenue Test
Negative externality
Cross-Price Elasticity of Demand
Determinants of Supply
42. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Excise Tax
Spillover benefits
Substitution Effect
Free-Rider Problem
43. The practice of selling essentially the same good to different groups of consumers at different prices
Complementary Goods
Least-Cost Rule
Free-Rider Problem
Price discrimination
44. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Consumer surplus
Marginal Analysis
Price Elasticity of Supply
Production function
45. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Price elastic demand
Determinants of elasticity
Substitute Goods
Shortage
46. Ei = (%dQd good X)/(%d Income)
Market Economy (Capitalism)
Marginal Product of Labor (MPL)
Market power
Income Elasticity
47. Ed = (%dQd)/(%dP). Ignore negative sign
Price elasticity
Marginal Cost (MC)
Average Fixed Cost (AFC)
Cross-Price Elasticity of Demand
48. Exists if a producer can produce a good at lower opportunity cost than all other producers
Monopsonist
Comparative Advantage
Demand for Labor
Absolute Advantage
49. Entry of new firms shifts the cost curves for all firms upward
Monopoly long-run equilibrium
Determinants of elasticity
Absolute Advantage
Increasing Cost Industry
50. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Break-even Point
Total variable costs (TVC)
Four-firm concentration ratio
Price floor